Economic Decline and the Crisis of American Liberalism

Gerlach, Allen, Contemporary Review

As President Clinton starts his second term two things seem certain: his country s traditional optimism and confidence have weakened and the United States is, in political terms, essentially conservative. In the recent campaign both President Clinton and Senator Dole reflected the nation's conservatism. This brief essay asks and tries to answer why American optimism and liberalism are hard to find as the twentieth century nears closing, and suggests that lower rates of economic growth and a wide array of new social problems have resulted in less willingness to be taxed and to spend, and great frustration about government's ability to solve problems.

Some of the gloom can be quantified. Sixty per cent of the people feel their children's lives will be worse than their own. The last quarter century saw divisiveness, scepticism and frustration soar and optimism, confidence and civility plunge. Polls reveal weakened confidence in public schools, business, the media, medicine, organised religion, government and the future. Fewer than half of those eligible vote for Presidents; about a third vote in congressional elections. In the 1996 election less than 50 per cent of the voters voted: the lowest turn-out since 1924. In 1966, 40 per cent of Americans had a great deal of confidence in Congress and the President. By 1994 the figures were down to 10 per cent.

During their first 150 years the Americans generally embraced staunch individualism and laissez faire government; in the last 60 years they created the modern welfare state. Rural, agrarian America employed government far more sparingly than its urban, industrial successor. Like all modern nations, America now draws heavily on shared resources to confront common problems.

Why the new negativism and conservatism? The following analysis makes the cases that they were engendered and then sustained by the interplay of two forces: a slowdown in the rate of economic growth since 1973 which has confronted Americans with the choice of higher taxes or fewer services, and the continuing impact of the cultural revolution of the 1960s. Americans have opted for fewer services, making it more difficult to meet new problems. First, the slowdown in economic growth.

From the Civil War to 1973, America's annual economic growth averaged about 3.4 per cent, an unrivalled rate, although Germany's was around 2.5 per cent and Japan's about 2.8 per cent. Especially from 1950-73, when growth averaged 3.9 per cent, wages rose, fringe benefits expanded, government grew, poverty declined, Americans were full of optimism.

Since 1973 growth has averaged only 2 per cent. The drop is a decline in growth of 1.4 per cent. But more important, it is a plunge of over 50 per cent in the rate of increase in growth. President Clinton stresses that the economy grew at an average rate of 2.7 per cent a year during his administration. But the long term trend is clear and the consequences of the nearly quarter century long dive in the rate of increase in growth have been enormous.

Productivity plummeted. Increases in the economy's output of goods and services per hour of work raises the standard of living. Productivity grew annually about 2.3 per cent during the first half of this century, soaring to 2.7 per cent for a time after World War II.

But since 1973 productivity has averaged around .9 per cent a year, the worst 20 year showing in this century except for the early 1930s. This decline, coupled with changes in cultural mores, made people troubled and sceptical, their discussions about the role of government feverish and uncivil.

Had pre-1973 growth been sustained, from 1973-93 production would have been, after inflation, about $12 trillion more than it was, enough to have paid off all government debt, all home mortgages, all credit card debt, and buy each homeowner a new home and each factory owner a new factory and new capital equipment. Even a 1 per cent increase in growth over actual rates would have generated $2. …

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